Can-Fite's Promising Psoriasis Drug Could Unseat Celgene's Latest Entrant

| About: Can-Fite Biopharma (CANF)


Utilizing a novel biochemical pathway, Can-Fite's pipeline of drugs in mid-stage clinical trials targets large markets for disease where current drugs have drawbacks.

Can-Fite's compound for psoriasis is showing similar efficacy to Celgene's Otezla, without the risky side effect drawbacks.

Can-Fite is a micro-cap stock, and carries risks typically seen with small companies. Success in past psoriasis trials may not translate to future ones.

Creating a new approach to treating disease, Can-Fite BioPharma Ltd. (NYSEMKT:CANF) has adroitly harnessed a novel biochemical pathway in the fight against psoriasis, a chronic inflammatory autoimmune disorder affecting 125 million globally, in a market expected to reach $4 billion next year. Current medicine fell short - disease-modulating antirheumatic drugs (DMARDs) with sporadic efficacy and monoclonal antibodies with side effects like tuberculosis comprise most of the market for treating this disorder - until biotech behemoth Celgene Corp. (NASDAQ:CELG), in a much-commented departure from its core cancer franchise, won approval in March with orally-administered Otezla (apremilast), with approval for psoriasis itself expected after the summer. Still, Otezla does not represent an ideal cure.

Celgene chose a new mechanism of action to make the drug effective - selective inhibition of phosphodiesterase 4 (PDE4) - usually reserved for asthma-like conditions. Clinical results are confusing: in a pivotal Phase III, apremilast reduced psoriasis in 33.1% of patients, but compared negatively to a Phase II trial showing improvement in 41%, raising the question of reduced efficacy in larger populations and how this difference will translate to sales. Certain troubling side effects are being overlooked. Celgene has been uncharacteristically vocal about Otezla's future, expecting peak revenue of $2 billion in the next three years and forming the cornerstone of its new generation of blockbuster hopefuls that will compete heavily with entrenched biologics like Humira from AbbVie, Inc. (NYSE:ABBV) and Enbrel from Amgen Inc. (NASDAQ:AMGN).

Can-Fite, using an orally-administered agonist (binder) for the A3 adenosine receptor, offers a potentially superior treatment with negligible side effects. Published Phase II data for lead compound CF101 in psoriasis, from a randomized, double-blind study of 75 psoriatic patients in a dose-ranging study over 12 weeks, showed statistically significant improvement in the group receiving a 2mg pill at week eight, after progressively positive results. Two standard scoring systems were used: the Psoriasis Area and Severity Index (PASI) measures average redness, thickness and scaliness of skin, where a higher score means better resolution of patches, and the Physician's Global Assessment (PGA), where low scores indicate greater clearing up of plaques.

More than one-third scored greater than 50 under PASI, considered a clinically meaningful endpoint by physicians, and almost one-quarter achieved a PGA score of 0 or 1, compared to no meaningful benefit seen in the control group. Good patient tolerance and safety were observed. Adverse events in the 2mg group were very mild, including sinusitis and earache, confined to only a few patients. Results suggested CF101 could be taken longer than 12 weeks with an even better outcome.

Safety is key for dermatologists, who want to avoid long-term monitoring of side effects, which may present a problem for Celgene. A first glance at Otezla's toxicity profile reveals events like nausea and vomiting, but a closer look shows a darker side of the drug that is much more unpleasant than gastrointestinal upset - depression and suicidal thoughts. Popular reference website, states that during clinical trials, depression was reported as serious in 0.2% of patients taking Otezla, and a similar percentage showed suicidal behavior. In a small sample, this may not seem significant, but extrapolated to the entire population of patients with psoriasis, this severe side effect amounts to one-quarter of a million individuals whose quality of life is already damaged by disease.

As a new drug, Otezla already has critics. Recently, a highly respected rheumatologist affiliated with the University of Texas Southwestern Medical Center went on record to say that "for the majority of patients, until longer-term safety data are available, apremilast should be reserved for patients who have failed DMARDs and biologics".

Looking at the history behind the science that created apremilast reveals some unsettling facts, yet ties into Celgene's success, which began with the banned drug thalidomide, whose use in pregnant women in the 1950s for morning sickness caused terrible birth defects - babies born without fully-formed arms. Celgene discovered that thalodimide possessed powerful anti-inflammatory action through its inhibition of TNF-alpha, a cytokine involved in the body's immune response, and was granted its first FDA approval, ironically, for use in leprosy. Later, thalidomide was found to have anti-angiogenic qualities that stop the growth of blood vessels; hence its value in cancer.

Celgene, born out of research into chiral compounds that often form the basis of designer drugs, first capitalized on thalidomide analogs with its best-seller Revlimid for blood cancers. Once a novel group of analogs that inhibited PDE4 activity was found, work began to boost their activity by adding molecular structures and features to the analogs. One of them was roflumilast - a PDE4 inhibitor used for chronic obstructive pulmonary disease (COPD) sold as Daliresp by Forest Laboratories, Inc. (NYSE:FRX) - and the biochemical recipe eventually resulted in Otezla.

Roflumilast has a list of horrid side effects involving mental illness, including new or worsening depression, thoughts of suicide, death obsession, fear, mood and behavioral problems, and acting on dangerous impulses. Despite being the first oral medication for COPD with the assignment of 1,200 detail reps to promote it, Daliresp sales of under $250 million since its August 2011 launch hardly make it a blockbuster. Worse, Forest Labs received an FDA warning letter not long after the drug's introduction, when two reps minimized serious psychiatric risks, including suicidality. Last year, concerns about adverse psychiatric events in patients taking Daliresp prompted a study that uncovered a disproportionately high number of reported incidents, including six suicide attempts.

The last thing psoriasis needs is a new drug with serious side effects. Methotrexate, a DMARD initially developed for leukemia that loses its therapeutic response in 70% of users, can cause hair loss, nausea, and loss of appetite, much like chemotherapy. The biologics lead the market for psoriasis treatment, despite fading in effect over time, and are often combined with methotrexate. Doctors prescribing biologics are cautious about their immunosuppressant activity that can lower the body's ability to fight infection, resulting in serious respiratory disorders. Mixing with methotrexate enhances the side effect profile considerably.

Can-Fite's unusual approach to psoriasis and other diseases addressed by drugs in its pipeline draws upon an inherent but unexploited property that governs the interrelationship and progression of inflammation and cancer. Recognizing that malignant tumors are extremely rare in striated muscles, Dr. Pnina Fishman, CEO and co-founder of Can-Fite, discovered that muscle tissue secretes certain cytokines, or proteins involved in inflammation, which halt the proliferation of tumor cells but leaves normal tissue untouched. The anti-tumor component was eventually identified as adenosine; when one of adenosine's receptors - A3 - is activated, the anti-cancer effect is observed, leading researchers to conclude the receptor is a good target for cancer therapy.

In the meantime, work from independent laboratories explored prospects for new drugs targeting the adenosine receptor, and a growing base of knowledge showed that activated A3 receptors have a cumulative effect on the immune system that are anti-inflammatory. Since then, Can-Fite has developed a pipeline of agonists for the A3 adenosine receptor: CF101 is studied being studied in Phase II trials for rheumatoid arthritis as well as psoriasis and certain disorders of the eye, CF102 is in mid-stage trials for liver cancer, and CF602 is in preclinical development for inflammatory disease.

Progress in psoriasis is continuing at Can-Fite. Earlier this year, interim data from Phase II/III studies found that all patients responded very well to CF101, with no safety issues. Recent news confirmed that the trial's enrollment goal of 300 patients throughout 17 sites in the US, Europe, and Israel has been reached, and initial results should be announced by March of next year.

Can-Fite, with its small staff of scientific talent is, of course, at a much earlier stage of life than Celgene, who numbers among its employees, over 2,000 in research and development. Much work needs to be done before the point of competition between CF101 and Otezla is reached. However, good science, evidenced by reams of published research that backs Can-Fite's claims, will prevail. Can-Fite has shown compelling work so far, supporting CF101's potential value for the very large, untapped market of psoriasis, putting the company solidly on the road to one day go up against the house that thalidomide built.

An investment in Can-Fite comes with standard small-cap risks: market capitalization is under $50 million; shares may experience volatility as trading volume is light (although over time, volume should catch up to the level shares are traded in Tel Aviv); information is not as readily available as with larger companies with more research coverage; the business model is yet untested for scalability. It is possible larger trials of CF101 for psoriasis will show lower efficacy, as in Celgene's case.

However, medicine awaits new therapeutic options based on new mechanisms of action to reshape psoriasis therapy. With compounded annual growth projected at 7.3%, expansion of the psoriasis market will be driven by emerging treatments whose success will depend on better safety profiles. If clinical trials continue to pan out, Can-Fite will not only validate CF101 as superior treatment, but also secure its place among big drug makers selling into multi-billion dollar markets.

Disclosure: The author is long CANF, CELG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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